Which Way is Up? Stocks Battered Again; VIX, Bond Yields Exploding

Volatility is back, to the chagrin of equity investors who have enjoyed the easiest ride to Easy Street possibly in the history of the US stock market.

The VIX, a broad measure of market volatility, spiked today as high as 15.16, a huge move, considering the close on Wednesday was 10.03. That's better than a 50% move to the top, though the slaughter was interrupted and canceled midday, when it appeared the world was ending. No doubt, the PPT another central bank cohorts rushed to the aid of everybody in quelling the panic, sending the VIX back to 11.44 at the end of the session.

The Vix halting helped the major indices to some degree, though it could not stem the selling. The Dow melted down as low as 21,203, a full 250 points from the close on Wednesday. The NASDAQ was again hit full force, bottoming out at 6090, before receiving somewhat to close with a mere 90-point loss.

With the Federal Reserve's loose policy unchecked for eight years running, stock picking has been easier than throwing darts at a barn door. Despite the easy money, most hedge fund and money managers have failed to keep pace with simple indices, a shameful state of affairs for the people who are supposed to know what they're doing when it comes to investing. Now, as everything from the presidency to health care to the media and the future of the global economy is being questioned, the bifurcated reasoning of ultra-low interest rates and gambling recklessly in equities is beginning to lose some favor.

All of this came as the government reported, prior to the opening bell, first quarter GDP at a surprising 1.4% growth rate. This was the third estimate, after the first - back in April - came in at 0.7, and the second, in May, was better, at 1.2, were still below an acceptable range. Apparently, nobody is particularly interested in an economy that is growing at less than two percent, and maybe even less interested in the government's goal-seeking statistical chicanery.

It seems, from all appearances, that the Federal Reserve is being taken seriously about rising rates, if one agrees that bonds tell the real story. The rally in the 10-year note has been shunted, with yields spiking the past few days, opening at nearly 2.30%. The note closed at 2.267, a gain of better than two percent, a large move in treasuries.

Tech stocks were the usual suspects, as the FAANGs took the heat. Facebook, Apple, Amazon, Netflix, and Google all suffered losses on heavy volume.

So, is this the beginning of the end of the bull market?

Maybe. Maybe not. Nobody really would know, though there are those of the opinion that the market is vastly overextended and the core economy is under-performing and facing severe deflationary pressure.

What to watch now are the movie averages. The Dow is still gleefully above its 50-day moving average, but the NASDAQ closed precisely on its 50-day, as is the S&P. Further weakness could send sell signals and a plummet through the 50-day toward the 200-day.

Also to keep in mind is the rough guideline for correction territory, which is casually assumed to be a 10% decline.

The NASDAQ topped out at 6341.70, nearly three weeks ago. A quick look at a NASDAQ chart reveals the collapse on Friday, June 9, exactly three weeks ago as of tomorrow, as if somebody rang a bell, denoting the tippy-top of the market. A level of 5707 would have to be met for the NAZ to fall 10% and it is the most vulnerable index, having had the best run-up over the past three months.

Not that it would be a huge move, though significant in percentage terms, but it would erase gains all the way back to February 9, so just five months of lost appreciation.

Friday closes out not only the week, but the month and the quarter, so it should be instructive from a technical standpoint, if that actually matters any more.

Bull markets do not last forever, no matter how low interest rates are nor how easy money is to lend.

At the Close, 6/29/17:
Dow: 21,287.03, -167.58 (-0.78%)
NASDAQ Composite: 6,144.35, -90.06 (-1.44%)
S&P 500: 2,419.70, -20.99 (-0.86%)
NYSE Composite: 11,739.98, -72.82 (-0.62%)

Central Banks Exert Control By Boosting Prices Day After Huge Declines

As mentioned in the opener of yesterday's post, forget about trying to apply fundamentals to this market. It is hopelessly rigged.

A commentator on a message board elsewhere explained the phenomenon of yesterday's jawboning-inspired selloff aptly. To wit: it's a charade by the central bankers to provide an easier entry point for which to make even more money boosting overpriced stocks.

Ergo, today's whipsaw. If the reader has half a brain, no further explanation is necessary.

There will be no crash until deemed useful for the central bankers in charge of the stock market.

Cynical? Yes. On the mark? Likely.

At the Close, 6/28/17:
Dow: 21,454.61, +143.95 (0.68%)
NASDAQ: 6,234.41, +87.79 (1.43%)
S&P 500 2,440.69, +21.31 (0.88%)
NYSE Composite: 11,812.80, +95.88 (0.82%)

Fake News, Fake Markets, Fake Money: Big Losses As Central Bankers Talk Tightening

Good luck to anyone trying to do fundamental analysis in this market.

Jawboning by Fed officials and today, especially, the grand liar of Europe, Mario Draghi, led the assault on spec stocks and the market in general by threatening to take away the low interest rate punchbowl.

Draghi's comments came at an economic conference in Portugal, ECB President Mario Draghi said that as economic prospects improve in Europe, the ECB could make adjustments to its policies of sub-zero interest rates coupled with huge bond purchases.

As if that wasn't enough, a trio of Federal Reserve loudmouths set their jaws to yapping about asset values, cueing a collapse in the equity and bond markets.

Fed Chair, Janet Yellen, Vice-chair Stanley Fischer, and San Francisco Fed President John Williams all focused on high equity valuations in speeches at separate locales.

Thus, market participants wet their pants on the awful prospect that their enormous gains would somehow evaporate if the accommodative policies of the Federal Reserve were to be unwound. Of course, they're right. Almost all of the gains of the past eight years have been the result of loose monetary policy. Any tightening of such policies would mean that stocks might not be so easily gushed to higher levels.

Bond yield rose substantially, with the 10-year-note gaining to 2.19%, erasing all of June's gains.

Not that any of today's loose lip talking matters. Actions will determine the ultimate direction of the markets. While some degree of sanity and honest price discovery in markets would no doubt involve a lower rate of return than what's been considered normal since 2009, it also might result in crisis, as all manner of wealth is tied to stocks and their continued appreciation.

At the Close, 6/27/17:
Dow: 21,310.66, -98.89 (-0.46%)
NASDAQ: 6,146.62, -100.53 (-1.61%)
S&P 500 2,419.38, -19.69 (-0.81%)
NYSE Composite: 11,716.92, -41.94 (-0.36%)

Target Zero: NASDAQ Unlucky in Lift-Off Sell-Off (Pump and Dump)

It wasn't a very pretty day for the moneychangers traders of paper stocks.

Nor was it particularly pleasing for goldbugs to see the precious metals smashed down around 4:00 am ET, but, then again, when it comes to gold manipulation, it's best to do it when most people are sleeping.

Theses manipulated markets are nearing the end of their central bank lifelines, though it is difficult to comprehend how the Fed, ECB, SNB, BOJ and others would pull the proverbial rug out all at the same time.

Therefore, a crash probably isn't in the cards, unless one is playing the political angle. In that scenario, we have the media and Democrats losing their war against President Donald J. Trump, who continues to steamroll over the Washington insider elite as though they ceased to matter after January 20th of this year.

In some ways, the Donald is right. Washington insiders and the mainstream media don't matter in the grand scheme of things, most of which revolves around MONEY.

Regarding that, stocks ramped pre-market, then sold off throughout the session. Oil finished flat. Gold and silver were hammered, as mentioned above, in a pre-dawn raid of the phony futures market, but mostly recovered. The major equity indices finished flat on the main, except for the NASDAQ, which took on some water.

Macro data had US durable goods orders down 1.1% in May after a 0.9% loss in April. That, in part, spurred the sell-off after lift-off in stocks.

Stocks are certainly being kept afloat by central banks and crony commercial banks. There's nothing even remotely normal about how stocks have been behaving since the great recession off 2008-09, but just in case anybody asks, the spread on treasuries - 2s and 30s - tumbled again to 134bps - marking the flattest treasury yield curve since late 2007.

Recession is overdue, which means the US economy is probably already in one. Pension holders and 401k dreamers will be the last ones to know.

At The Close, 6/26/17:
Dow: 21,409.55, +14.79 (0.07%)
NASDAQ 6,247.15, -18.10 (-0.29%)
S&P 500 2,439.07, +0.77 (0.03%)
NYSE Composite: 11,758.86, +25.66 (0.22%)

The Long and Short of the Approaching Recession (Depression)

For those out there reading this short missive, a warning that time and space are constraints upon the lives we live, the bread we bake, the food we eat, the products we produce, the jobs that sustain us and the government that pretends to cater to us.

Time and space - according to most adherents of pure physics - are not constraints upon thinking, thought, creativity and imagination.

Indulgence should be given more, in these days of financial peril and social inequality, to solutions derived in the mind, translated to the body by practicality and functionality.

In both the long and short discussions of current finance, there can be little doubt that the system of capitalism by which the developed world has grown and prospered is under severe strain and the solutions offered by the central bankers and government entities who pretend to know how it all works are nothing more than stop-gap measures intended solely to prevent, or at least, delay, a complete collapse of a fragile, human-made system.

Economics, being mostly theoretical, and therefore, unbound, unfortunately needs to operate in a closed, bound, system, restrained by those old devils of time and space. As has been frequently mentioned in higher-level economic discussions, "infinite growth is unsustainable in a finite world."

With that in mind, this weekend edition of Money Daily offers but a brief insight into the unraveling of the world order of finance already well underway.

On the whole, Friday was a washout to a week in which the major indices - with the notable exception of the NASDAQ - vacillated around the unchanged line. In the current nomenclature, stock indices - wherein the vast bulk of trading is performed by computer algorithms and central banks - are a control mechanism. So long as they are stable or going higher, the general population feels comforted and won't look around for cracks in the not-so-golden facade of global finance. As such, this week was very much like the previous six, or eight, or eighty. It was, in general terms, a big nothing-burger.

But, what does the outsize gain on the NASDAQ tell us, when the other indices were going exactly nowhere fast?

It says that the NASDAQ is where the speculation exists, where all the funny money or phony money is going to seek yield, mostly in tech-land, but also in energy stocks and in short-squeezes on the most-shorted list. It's how the game is being played at the top. If shorts are numerous on a particular equity, that where the money flow will be most pronounced, on the long side. Boom! Instant profits and a great weekend in the Hamptons awaits.

For the rest of us, we are placated with the rest of the market going sideways. At least - we comfort ourselves in saying - it didn't go down, much.

An expanded view looks at a couple of issues. Oil took another beating this week as the glut continues, though this fact is not to be promulgated to the general population. We are led to believe that oil is scarce and the price of gas with which to fill our cars should remain at elevated levels.

Nothing could be further from the truth. A variety of factors, including, but not limited to, better fuel consumption, an aging population, alternative energy sources, stagnant or slowing employment, and a more stay-at-home, economically-depressed middle America, is leading to the reality of oversupply meeting slack or declining demand. Oil will continue to fall until it becomes apparent that the big energy companies are squeezing every last nickel and dime out of consumers in the form of stubbornly high gas prices. At some point, the price of gasoline will merit a meeting with reality and then, gas will average, nationally, under $2.00 a gallon, notwithstanding the absurdly-high state and federal taxes on each and every gallon pumped. It's coming. It cannot be denied.

Overseas, the demise of two Italian banks on Friday was, typically, underreported. Banca Popolare di Vicenza and Veneto Banca, with combined assets of roughly 60 billion euros, were green-lighted by the ECB on Friday for liquidation. In other words, these banks are belly-up, bankrupt, kaput!

The Wall Street Journal, Reuters, Bloomberg, the AP, all reported the story. The mainstream media, such as ABC, NBC, CBS, CNN, et. al., i.e, the fake news propagandists, did not.

There you have it. The general public will not be told the truth about the fraility of the banking system for fears people would recall the horrors of the GFC of 2008-09.

Two Italian banks failing may not make the radar of disinterest parties such as the 98% of Americans who don't pay attention to nor understand economics or finance. Neither did the closure of two Bear Stearns funds back in the Spring of 2008. You are now forewarned and forearmed, with knowledge.

The world'd financial system is unwinding and the pace is quickening. Disruptions are already apparent in the forms of capital controls - mostly overseas, but heading to US shores soon - supply chain disorder, falling tax receipts, social unrest, and, most importantly and glaringly obvious, income disparity.

Stay informed, not from the mainstream sources, but from outside. The internet is s treasure trove of information that you're not supposed to know about. It will help you form opinions and strategies by which you can deal with the coming hard times.

Your thoughts and ideas have no limits. Time and space cannot prevent you from thinking, strategizing and planning for your won welfare.

At the Close, 6/23/17:
Dow: 21,394.76, -2.53 (-0.01%)
NASDAQ: 6,265.25, +28.56 (0.46%)
S&P 500: 2,438.30, +3.80 (0.16%)
NYSE Composite: 11,733.20, +20.68 (0.18%)


For the Week:
Dow: +10.48 (0.05%)
NASDAQ: +113.49 (1.84%)
S&P 500: +5.15 (0.21%)
NYSE Composite: -38.83 (-0.33%)